Investment Bank

Investment Dictionary -> Investment Bank

Investment Banks represent individuals or legal entities which act in the capacity of underwriters that trade securities for companies and municipalities. Most investment banks also undertake brokerage operations and maintain the market for previously issued stock. They offer consultative services to investors in view of equity securities, foreign exchanges, derivatives, and commodities, among others. Investment banks track the securities market and offer advice on the most suitable timing for public offerings. They provide consultations on best approaches to the management of companies' public assets. In addition, these bodies facilitate mergers and acquisitions, corporate restructuring, and divestitures.

In general, investment banks assist businesses in the acquisition of funds. Their activities are organized into front, middle, and back offices. The front office assists with fund raising and offers advice on mergers and acquisitions. This branch is responsible for the provision of assistance to clients who operate in diverging market conditions. The branch employs quantitative instruments and takes the microeconomic climate into consideration. The front office contains a research branch that examines the prospects of businesses and offers assistance to potential investors. The middle office is responsible for the assessment of the market situation and the economic risks. Its two major functions involve market and credit risk assessment. The finance branch functions to manage the capitals of the company and to monitor the level of risk. Finally, the back office deals with transactions and conducts data checkups. Its information and technology department provides the necessary technical support.

Investment banks in the USA are represented by companies such as Merrill Lynch, Morgan Stanley Dean Witter, Citigroup, Goldman Sachs, JP Morgan, and Chase Manhattan Corp. In Canada, some of the large investment banks include the BMO Capital Market branch of BMO Financial Group, and others.

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